Iraq’s Petroleum: Challenges of Managing the Plenty

Accordingly, Iraq might face four very different situations/scenarios: Honeymoon, Delicate Balance, Risky and Nightmare depending on the state of the world economy and global energy balance. This second part of the paper calls upon the Iraqi high decision makers to begin immediately formulating proactive “Multiple Coping Strategies-MCS” to prepare for the eventualities of these four possible situations (Slides 11:13). MCS proposal and framework go beyond upstream petroleum sub-sector but it is absolutely necessary to ensure and emphasis the required harmonisation of energy strategy with national development planes and related planning at national level. Accordingly, this part provides conceptual analytical framework for an on-going institutional arrangement entrusted with identifying the characteristics and dynamics of each situation; discuss viable policy options to manage and mitigates related consequences and suggest required institutional, legal and good governance frameworks to insure proper management of the generated oil revenues.

Transparency is a fundamental component of the above mentioned governance structure. Therefore, part three of the paper discusses the Iraqi case within the frameworks of the NRC and EITI (Slides 14 & 15). For this purpose the paper introduces and argues for functioning “Transparency of Value Cycle-TVC” paradigm covering the actual flow of resources and revenues focusing on three important interconnected clusters: payments and investment by IOCs; increase in production and revenues for the country; payment by the country to the IOCs for cost recovery and remuneration fees, and finally after the payment of the IOCs the due taxes, the share of the State partner and other payments the IOCs reinvest the remaining amounts in the field and so goes the cycle. And since each of the Iraqi LTSCs extends well over 20 years duration the TVC becomes important annual component of transparency reporting that requires constant monitoring and verification by well-established and competent Iraqi entity (IEITI). For Iraq and other developing countries TVC is useful framework to ensure real, accurate and comprehensive transparency in the upstream petroleum and other extractive industries.

The five components of the “Value Chain” adopted by the Extractive Industry Transparency Initiative-EITI correspond in fact to the “Precepts” number 3 through number 10 of the NRC framework. Though Iraq is progressing in its compliance to the EITI Standard, the country has a long way to go in its compliance with requirements of the NRC /EITI frameworks, especially with regards to utilizing the depleting petroleum resources for the economic and social sustainable development in the country.

Finally, the presentation concludes by summarizing the main challenges facing Iraq and grouped them in 10 categories, asserting they could impact the development of upstream petroleum development and consequently the growth and prospects of Iraqi economy (Slide 16).

The full paper can be downloaded here.

Mr Jiyad is an independent development consultant, scholar and Associate with Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya@online.no).

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